The Landlord Times - On-Site- October 2013 by Professional Publishing, Inc

ON-SITE

Professional Publishing, Inc www.TheLandlordTimes.com

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Vol. 22 Issue 10

October 2013

Published 21 Years

Get Social With The Landlord Times

Puget Sound Apartment Owners, Property Managers & Maintenance Personnel

Published in association with: Washington Apartment Association, IREM & Washington Multifamily Housing Association

Fair Housing Case Brought & EPA Takes Action on Lead Violations By Jo Becker, Education/Outreach Specialist, Fair Housing Council

Discriminating against families with children – even in pre-1978 properties that have lead – can also cost you! It is illegal under the federal Fair Housing Act (FHA)1 to deny housing to otherwise qualified families with children (or otherwise treat them differently in any way) simply because there are children in the household, unless the housing provider is exempt as a “designated senior community. The Renovation, Repair and Painting rule protects homeowners and tenants from dangerous lead dust that can be left behind after common renovation, repair, and painting work. It requires that contractors and subcontractors be properly trained and certified, and use Continued on page 2

A Personal Board of Directors… Do You Have One?

What Renters Want By Katie Poole

utting yourself in the tenants shoes may not be something you’ve done often, if ever. As our clients, it’s very important to know what tenants want and what will make your best residents rent long-term. High tenant satisfaction can not only enhance retention and occupancy rates, but also lower expenses and improve your bottom line. With so much riding on the satisfaction of your tenants, it is critically important to stay close to their priorities, perceptions and concerns. To be heard is a universal human need, and our tenants are no exception. Treat an existing tenant the way you’d treat a new one. From the first meeting through the end of the tenancy, practice active listenContinued on page 5 Page 19

by Ernest F. Oriente, The Coach {Article #211…since 1995}

roperty management is rapidly changing, and you are faced with more decisions then ever before. Today’s fast-paced lifestyles create information overload. During your lifetime, you will have 10 or 15 major decisions and another 25-30 semi-major decisions. Developing a Personal Board of Directors will help you make great decisions and this article will tell you exactly how to implement this important idea. Once in place, you will never look back! Developing your Personal Board: Let’s start with the obvious. Your Personal Board of Directors might include: a doctor as a health/medical resource, a CPA for tax advice, an attorney for legal guidance, a banker for financial guidance and a priest/ rabbi/deacon for spiritual support. Professional Publishing, Inc PO Box 30327

Here are some of the less obvious: a sales and marketing professional, a public relations expert, a business coach, a child care specialist, a human resource professional, a webmaster for Internet guidance, a property management professional three levels above you, an executive in an unrelated industry to property management and/or a business owner in the property management industry but not a competitor, based on geography or your resident profile. Tip From The Coach: Think of a Personal Board as your “inner circle”, as each person on your Board will share in very important information about your personal and professional life. Carefully consider every individual you invite to be on your Personal Board, as they should be selected and remain on your

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Personal Board for the rest of your life. You can always make changes to the people on your Personal Board, but richness comes from working together during good times and bad. Like a great bottle of wine, proper “aging” of your Personal Board will give it fullness, maturity and increasing value. Working with your Personal Board: Once you have formed your Personal Board, the next step is to make a list of the ways your Personal Board can assist and support your success. Some examples of professional and personal topics to discuss with your Personal Board: a new career, the start of a new business, advancement in your property management company, the relocation of your family for professional or perContinued on page 2

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Fair Housing ...continued from front page lead-safe work practices to ensure that lead dust is minimized. Lead exposure can cause a range of health effects, from behavior problems and learning disabilities to seizures and death, putting young children at the greatest risk because their nervous systems are still developing. “Using lead-safe work practices is good business and it’s the law,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “EPA is taking action to enforce lead rules to protect people from exposure to lead and to ensure a level playing field for contractors that follow the rules.” The enforcement actions address

serious violations of the RRP rule, including fourteen actions where the contractor failed to obtain certification prior to performing or offering to perform renovation activities on pre-1978 homes, where lead is more likely to be present. Other alleged violations included failure to follow the lead-safe work practices, which are critical to reducing exposure to lead-based paint hazards. Recent enforcement actions across the country include 14 administrative settlements assessing civil penalties of up to $23,000. These settlements also required the contractors to certify that they had come into compliance with the requirements of

the RRP rule. Additionally, EPA filed three administrative complaints seeking civil penalties of up to the statutory maximum of $37,500 per violation. As required by the Toxic Substances Control Act, a company or individual’s ability to pay a penalty is evaluated and penalties are adjusted accordingly. You can read up on the settlements at www.epa.gov/enforcement/waste/cases/lrrp050213.html. For more about lead and instructions on getting certified go to www.epa. gov/lead. You can also find additional information, including required pamphlets and disclosure forms as well as additional lead arti-

cles at www.FHCO.org/lead.htm. Following is a media release from Fair Housing Center of Greater Boston The Fair Housing Center of Greater Boston (FHCGB) announced that a West Roxbury Property Management Company has agreed to pay $15,000 in a housing discrimination case that resulted from posting a Craigslist advertisement indicating their unwillingness to rent to families with children because of the lead status of a rental unit. On September 3, 2013, the FHCGB entered into a settlement agreement with Charles River Realty Group and Karen Coffin, property manager for Continued on page 21

tice” makes for perfect decisions! Communicating with your Personal Board: The next step is to decide how often you will meet with your Personal Board. For some, monthly is perfect, for others twice a year is great and many meet on a quarterly basis. The frequency is up to you and your Board members, but the frequency should depend on the velocity of issues or decisions you are making. Here are some examples of ways you can meet or communicate with your Personal Board: in person, by telephone, by teleconference as a group, by E-mail, by letter,

by video conference or during a nice meal. With today’s menu of technology, the distance between you and your Personal Board members is no longer an issue. Instead, invite only the best to be on your Personal Board and allow technology to facilitate your communications. Tip From The Coach: As you invite each member to participate on your Personal Board, be very clear about your expectations for each board member, the frequency you will meet or be in touch, and your request for pointed and honest feedback. After each person agrees to be Continued on page 3

A Personal Board ...continued from front page sonal reasons, how to handle a problem employee or supplier problem, life and legacy planning, your children and their development, financial planning, and the health of your marriage, just to name a few. You see, your Personal Board will be a rich resource to you in many ways, so long as you speak truthfully with them and are open to their specific advice and feedback. Tip From The Coach: While your Personal Board can give you powerful guidance and suggestions, the final decision must always be yours. When making an important profes-

sional/personal decision, take a blank sheet of paper and list all the pros and cons surrounding the issue, then ask for and gather the feedback from your Personal Board. Next, write a brief summary statement to yourself explaining the reasons for your decision and store this sheet in a special place. Lastly, mark your calendar for some point in the future to evaluate the results of this important decision. A review of each important decision you make during your lifetime will help you evaluate your accuracy and clarity about the future. Remember, “perfect prac-

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ON-SITE A Personal Board ...continued from page 2 on your Personal Board, discuss how they would like to be compensated for their time. In most cases, a trade or barter is done for goods or services, in many cases a small gift or favor is enough. If necessary, offer to pay a small fee to each board member, as the value of their feedback will be returned many times over. Want to hear more about this important topic or ask some additional questions? Send an E-mail to ernest@powerhour.com and The Coach will E-mail back to you a free invitation to be a participant on a PowerHour conference call. On this call we will discuss how to form your Personal Board of Directors, in 30 days!

Author’s note: Ernest F. Oriente, a business coach since 1995 [31,000 hours], a property management industry professional since 1988--the author of SmartMatch Alliances--and the founder of PowerHour...[ www.powerhour.com and www.powerhourseo.com and www.pirmg.com ], has a passion for coaching his clients on executive leadership, hiring and motivating property management SuperStars, traditional and Internet SEO/SEM marketing, competitive sales strategies, and high leverage alliances for property management teams and their leaders. He provides private and group coaching for property management companies

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ON-SITE

D&Z – What Were You Thinking Moments: Work Orders

uzy Manager – Dana, I have noticed lately that the maintenance department are taking too long on their work orders. This is causing residents to call and complain, what am I missing? D: Suzy Manager, I have always wondered why the administrative department doesn’t take more ownership in the maintenance issues. A little more effort will only benefit the property and improve the service you provide. Imagine saving money and time on most work orders. Administrators that know maintenance basics can provide enough information for the maintenance

team to allow them to only make one trip with all of the supplies they need to fix the work order. Furthermore, the questions the office team ask the resident in regards to their work order may lead to an easy answer to fix the problem and avoid a work order altogether. A little effort and knowledge by your leasing managers and on-sites can make the lives of your residents and maintenance team a lot easier. SM: That makes perfect sense. I am scheduling a meeting with my maintenance supervisor to discuss educating my leasing agents on maintenance basics and how to best

interact with maintenance staff. D: What are your thoughts on the relationship and interaction between leasing staff and maintenance, Zach? Z: Clarity and communication are they key. Let’s clarify from the start. A service request is simply something anyone at the site may want to be done by the maintenance staff. On the contrary a work order is when a service request is written down and documented. Based on my experience, I would make it mandatory for office staff to write up any service request into work order form, no matter how small. If a request is

not written up on a work order then it never really happened. Maintenance techs work best off of lists. A stack of generated work orders is the best type of list, because it forces the maintenance staff to address each work order and assign it to a specific destination -- either “not started”, “in progress”, or “completed”. This can correspond to work order bins at the office, so that each service request that is generated into a work order is assigned and returns to the office to be completed later or filed away as complete. Now that we have clarified that, let’s look at an easy way to generate continued on page 20

Landlady Katie ...continued from front page ing. This means don’t interrupt them, maintain eye contact when in person, acknowledge what they’ve said and repeat back what you’ve heard to make sure they feel understood. Take an interest in each resident’s business and stay in touch with them regularly, not just when they complain or it’s time for a renewal. When a tenant calls to complain, you should listen, empathize, and solve the problem. Don’t make excuses. Most often tenants just want someone to listen to their stories or concerns. Keep all lines of communication open with your residents. Don’t be a stranger. It’s not enough simply to provide a lot of services to tenants. Being available in person can sway that renewal decision. Be timely in your responses to requests or questions your tenants will have. Not only are we bound by laws in our response times to some repair requests, but it is also a good business practice to respond within a reasonable time. Recap conversations in writing to maintain a paper trail of important communications. If you’re going to be unreachable at any time, be courteous and let them know how to handle any emergencies in your absence as you would expect this of them contractually. While it’s important to stay in touch and build a good working relationship with your residents, you also need to respect their need for privacy. Don’t make up excuses to “stop by” or leave notes for your tenants at the property unless absolutely necessary. Not only could this be construed as harassment but it

can also be annoying. The rental is their home. By law, you must give tenants plenty of proper notice before paying any visits to the property. Make clear your inspection policies and practices at move-in so that it is clear when they can regularly expect you. Lastly, would you live in your rental comfortably if you had to? Is the yard manageable? Do the appliances work consistently and to their potential? Is the unit weatherized to help keep the energy bills reasonable? Your rental should be a place that you can be proud of and that tenants will maintain with integrity. If you make sure that your property stands out as well-kept, then you can ask for slightly higher rent rates than those that don’t. Be flexible in your concessions. If tenants are offering to make improvements and they won’t be able to take with them at move-out, help them out. Help can mean purchasing the materials for a desired project while the tenants pay a contractors labor, or splitting the costs with your renters to add new internet jacks to a back bedroom. Spending on upgrades may hurt the bottom line over the short term, but improvements will pay dividends in long-term tenants. Offer a fair deal, use comps to explain your offer, and communicate your position clearly. If a property is well-maintained, it gives tenants a reason to stay.

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On-Site Northwest • October 2013

Dear Maintenance Men:

ON-SITE

By Jerry L'Ecuyer & Frank Alvarez Dear Maintenance Men: We are thinking of offering free WiFi at our 25 unit apartment building. What are the steps involved and what are your recommendations? Ryan Dear Ryan: Very interesting question! The short answer is hire a professional IT company who has experience in large wireless Internet installations. For the long answer, we contacted Paul at Acutech Network Services, Inc. www.Acutech.net . We have worked with Paul’s IT company for over ten years knew he would have a good answer: Today, consumer-grade wireless routers and access points are fairly easy to install and work well in most single family homes or small businesses and they will provide good coverage over a 100-150’ area and marginal coverage up to 200’. In a 25 unit building, one access point will not provide the coverage you will need. Without seeing the building, my educated guess is you will need about 6 access points. Now if you use consumer grade products, 6 access points will give you 6 totally independent SSID’s. (The SSID is what you see on your laptop or smart phone and connect to. Essentially, it is the connection point to the wireless network.) This will mean your residents will have to pick from one of 6 devices to connect to. For you, it will mean you will have 6 devices to manage, including managing passwords. And worse yet, because all these are independent devices, you may end up with “channel conflicts” where two or more devices compete for the same channel and knock each other off. When this happens, your residents will experience lots of dropped connections. In situations like this, the proper way to setup wireless is to use a centrally managed, commercial grade system with multiple access points. The access points on these systems each give better coverage than a consumer grade product designed for single family homes. They also function more like a cell phone network. In other words, there is a single connection point (or SSID) for the entire network. You can initially establish a connection at one end of the building (let’s say through access point #1) and

then walk to the far end of the building without dropping a connection. As you move away from access point #1 and your signal becomes weaker, the central management device tries to find you another access point to connect to with a stronger signal and manages the handoff in such a way that the connection does not drop … essentially the way a cell phone network works. Given these systems work with a single router & firewall, you will only need one connection to the Internet, you will only have one SSID for your entire network, and you only have one central place to manage passwords. The downside of these systems is they are more expensive than consumer grade products and are much more complicated to program which is why I recommend the use of someone who specializes in this technology. Dear Maintenance Men: I have 25 or so units (condos/ houses) all spread out and I am not sure how to handle keys. I hate to think that a previous resident will come and access the unit after they have moved out, but the $50 replacement of the lock has prevented me from replacing it every turn. I have heard about those easy to rekey locks where you simply put a pin in the front of them. Do you have any ideas how to manage this? Brian

safely if your units are spread out geographically. Another system that works very well with all rental units is the Kwikset Key Control Deadbolt system. This system allows the owner or management company to have one master key and the ability to rekey the lock without removal. It only takes a few moments to rekey a deadbolt. With this system, a temporary vendor key can be setup while the unit is being made rent ready. When the unit is rented, simply rekey and hand the new resident their new apartment key. http://www.kwikset.com/SmartSecurity/Key-Control.aspx Dear Maintenance Men: What is a pre-hung door and why would I want to buy one over a regular door? Matt Dear Matt: Pre-hung doors come already installed in the door frame. The components include the door, outside frame and the hinges. Before the

advent of “Pre-Hung Doors”, hanging a door required a skilled installer. Now a door can come already in its frame with the hinges in place. You must start with a rough opening, which means the old doorframe must be removed. The skill required is minimal and you can often do a professional looking job the first time.

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Dear Brian: As you are aware, you should always change locks on a unit turnover. You never know who might have keys to that unit. I think we can find a simple solution to your problem. Since your units are spread out and not all in the same building, a swap system can be put into place. Supply yourself or your maintenance team with two or three lock sets and when you get a vacancy, swap out the existing lock set with the spare set. The unit now has a new or different lock set and the old lock set can now be swapped into another unit the next time you have a vacancy. This system only works

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On-Site Northwest • October 2013

ON-SITE

The Multifamily Footprint in The United States in 2013 By: by John Wilhoit Jr.

hat percentage of the housing stock in the United States is represented by multifamily? We define multifamily as property with five or more dwellings. One would think there is an easy answer, alas, many very wellinformed individuals and institutions have varying answers. So how many multifamily dwellings are there in the United States, really? In a country of over 314 million people fully one-third live in rental housing. This number has increased somewhat since the start of the economic gyrations that began in 2008. As the foreclosure rated increased more people became renter’s. As the home ownership rate decreased the n u m b e r o f re n t a l h o u s e h o l d ’ s increased. It’s a pretty easy calculation to make for rental housing. Concurrently, as more family’s turned to renting versus owning, construction starts for all housing fell off a cliff. Even today housing starts are below levels necessary to maintain a viable housing stock given our population growth. Average household size in the U.S.

8 #

is 2.63 person per dwelling. Divide the population of 314 million people by 2.63 persons equals 119,391,634 households. Roughly 40 million of these are rental households. We are on our way to finding out how many people reside in just multifamily. Remember, rental housing includes single-family, 2-4 units properties and mobile homes, garages, tree houses, recreational vehicles are all forms of housing minus tents (Ok maybe not tree houses). We qualify multifamily here to account for converted garages, basements and attics that are sometimes utilized as rentals. A fourplex with a converted basement without an electric meter is not a multifamily asset; it’s a fourplex. Nor is a single family house recently converted without permits advertised as a duplex (all on one meter and with a few people living in the garage). According to the U.S. Energy Information Administration www.eia.gov in 2005 there were more than 16,500,000 buildings with five or more units. According to the National Multi Housing Counsel www.nmhc.org there are 17.8 million multifamily renter households today. Taking this number

multiplied by average household size of 2.63 persons per household provides an estimated number of total multifamily dwelling units in the United States. That number is: 46.8 million units. This is the number of housing units represented by buildings with five or more units. This number is not exact but certainly falls into the bell curve of having a high probability. This is a ”thumb sketch” number. We are not attempting to account for new construction, tear downs, vacancy etc. In my opinion, these numbers provide a breathtaking scope of just how important our industry is recognizing that we house a very large percentage of the population, account for measurable GDP and impact resources of all kinds; fire, police, ground water, transportation to name a few. Just something to think about. As an owner or property manager your contribution to mankind includes a footprint that is part of a very large, very important part of the American experience.

Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. http:// www.MultifamilyInsight.com

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ON-SITE

Seattle Washington Market Overview Multifamily Housing Update 2Q13 September 2013 by RED CAPITAL GROUP®

2Q13 Payroll Trends and Forecast Payroll job growth moderated during the spring quarter as Seattle concerns hired at a 32,900-job, 2.3% pace, down from 1Q13’s vigorous 40,900job, 2.9% advance. The slowdown was largely attributable to weaker trends in the business service and construction sectors, which expanded at a combined 6,400-job, 2.3% rate after posting a 12,500-job, 4.7% growth surge during 1Q13. Preliminary data for the third quarter suggest the labor market regained momentum over the summer. July and August payroll aggregates reflected 47,3000-job and 40,500-job 12-month gains, the July statistic representing the largest y-o-y advance recorded since 2007. Seasonally-adjusted data were consistent, showing a 7,300-job net increase in June and a 13,400-job gain in July. RCR employs three lags of the dependent variable and current and lagged U.S. payroll, inflation and output gap and metro personal income as variables to produce a 95.0% adj-R2 forecasting model. This model generates a highly positive forecast characterized by growth rates in the mid-2% to mid-3% range from 2014 through 2017, after a relatively sluggish (1.7%1.9%) second half 2013.

Payroll Job Summary Total Payrolls Annual Change 2013 Forecast 2014 Forecast 2015 Forecast 2016 Forecast NSA Unemployment

1,475.3m 32.9m(2.3%) 31.3m 36.1m 43.7m 47.4m 5.7% (Aug.)

2Q13 Absorption and Occupancy Rate Trends Following the first quarter’s near record net absorption of 2,118 units, space demand was moderately slower in the spring. Tenants net leased 1,042 units during 2Q13, according to Reis, up from 689 in the year-earlier period, and comfortably above the 604-unit 14-year spring quarter average. A decrease in new apartment deliveries was partially responsible, as developers added only 778 units to inventory during 2Q13, down from 2,087 units between January and March. Reis recorded a 96.0% occupancy rate, up 10 basis points both year-overyear and sequentially. Axiometrics surveys of stabilized larger properties reached a similar conclusion, finding a 95.7% 2Q13 weighted average, up from 95.1% in 2Q12. Supply will continue to challenge the Seattle market through 2015. Our

supply models suggest that nearly 5,000 and 4,000 units will be delivered in 2014 and 2015, respectively. Although we expect tenant demand to be healthy, it is unlikely to keep pace, contributing to occupancy declines in the 75-125 bps range through 2017.

Occupancy Rate Summary Occupancy Rate (Reis) 96.0% RED 50 Rank 5th 24th Annual Chg. (Reis) 0.1% RCR YE13 Forecast 94.7% RCR YE14 Forecast 94.9% RCR YE15 Forecast 95.1% RCR YE16 Forecast 95.0% 2Q13 Effective Rent Trends The healthy economy and strong demand for infill space drove rents substantially higher in the spring. Reis report that metro mean effective rent increased $14 (1.3%) sequentially and $64 (6.2%) year-over-year to $1,096, ranking first among the RED 50 markets. Momentum was fueled by large hikes in Downtown/Queen Anne submarket where the average rent surged $53 (3.6%) sequentially to $1,520. Axiometrics surveys recorded a 6.7% yo- y advance, propelled by 9% or faster growth in submarkets near aerospace and software employment centers

(Kent, Renton, Kirkland, Bellevue). RCR’s Seattle rent model is unusually strong (adj- R2=97.0%, STDER=0.7%), relying on five independent variables, including metro personal income, payroll and apartment stock growth; vacancy rates; and home prices. The results are impressive as rent growth averages 4.7% for the next five years (trailing only San Jose among the RED 46) and never falls below 3.7% (4Q14). Trends are likely to be a bit weaker through 2014 due to supply pressures, but 5%+ gains may return by 2016.

Effective Rent Summary Mean Rent (Reis) Annual Change RED 50 Rank RCR YE13 Forecast RCR YE14 Forecast RCR YE15 Forecast RCR YE16 Forecast

$1,096 6.2% 1st 5.1% 3.7% 4.6% 5.0%

2Q13 Property Markets and Total Returns As the availability of coveted infill assets dwindled trade velocity decelerated and investors shifted focus toward class-B suburban garden projects. A total of 15 transactions involving properties of 80+ units closed

Continued on page 12

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hile market conditions continue to fluctuate, there may be times when you find yourself in a situation where you have no apartments to show. Maybe you don’t have a model or the one you have is “out of commission” or you are in a make ready process with the vacant apartments that are available. Recently, I was asked the following question:

I know I shouldn’t show an apartment that isn’t ready, but I hate to ask someone to come back. I’m concerned they won’t make the time to come out a second time. What can I do?

First of all, you do not have to show an apartment in order to rent one. While many people are “visual” and having a model or vacant apartment to show is a tremendous tool, it is not the only tool. Following are some comments from a shopping report in which the leasing consultant did not have anything to show: With a diagram of the 2 bedroom, the consultant “walked me through” the apartment as though we were inside. She used the terms “you” and “yours” during the entire “virtual”

tour. She pointed out the various storage areas, using the floor plan, and she even showed me the shelf and cabinet over the washer and dryer. The consultant used descriptive words like “oak cabinetry” and “counter with breakfast bar.” She mentioned the wood-burning fireplace and also the vaulted ceilings. She then pointed out where the fireplace is located and indicated where the ceiling begins to get higher. The consultant made sure I understood the lay out of each room, and helped me visualize what type of furniture would fit in each area. When I questioned her about the location of electrical outlets and phone jacks, she was able to help me pick out the best place for my computer. When the apartment “presentation” was completed, the consultant walked me over to the location of the upcoming apartment. She pointed out and described the amenities we saw along the way and discussed the proximity of each one to the location of my apartment. She made sure I understood where I could park, as well as my guests. When we were outside the apartment, the consultant pointed out the other advantages of this particular location. She drew my attention to the

private patio, nearby fountain and lush landscaping. She also mentioned the quiet, friendly neighbors who live upstairs and next door. Once the leasing consultant confirmed that I was pleased with what I had learned about the apartment and community, she asked if I would like to put a hold on the apartment until it was ready for me to view. When I

declined, she told me that she understood my hesitation since I had not actually seen the apartment. However, she reminded me that it was the only one she had coming available, and that without a deposit she could not hold it for me. When I continued to hesitate, the consultant told me that my deposit would be

Continued on page 20

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ON-SITE

Time to Convert a Rental Property Prospect Visit to a New Resident: Under One Week

anta Monica, Calif., October 1, 2013 – Rent.com is releasing its annual property managers’ report, which captures trends in the rental market directly from apartment property managers nationwide. In the 2013 survey, property managers provided insight on the current and predicted demand for rentals, expected rent increases, how to retain residents, and the changing demographic profile of American renters. Renting Still Trending Rent.com found in its most recent survey that the rental market is still red hot. Compared to a year ago, 82% of property managers tell us that it takes the same amount of time (52%) or less time (30%) to convert a prospect who visits a rental property to a new resident. Additionally, 44% say there are more applications received per rental property on the market. Seventy three percent (73%) of the property managers surveyed said it takes just one week or less to convert a prospect who visits a property into a new resident. The majority of those, 47%, said it actually only takes a few days. With the rental market still tight, renters should be prepared to apply and sign on the spot if they

really like an apartment. The U.S. rental vacancy rate, 4.3% according to Reis, while historically low, was unchanged in Q2 2013. This marks the first slowing in the dramatic rate of vacancy declines witnessed the last few years. With new apartment construction beginning to come online, this could mean rental rate relief on the horizon for renters in the tightest of markets next year. But, let’s see what our property managers predict… Rents Going Higher, Inflation in Tow The majority of property managers, 60%, predict that rents will rise over the next 12 months and just 2% expect rents will fall; the remaining 38% think rents will be flat. Those who predict an increase foresee, on average, a five percent (5%) change over the next 12 months. The increase in housing prices is one of the key factors driving the 1.5% increase in the inflation rate as reported by the Bureau of Labor Statistics in September 2013.

1) Keeping rental rates competitive (flat/smaller) was ranked first by the clear majority of managers. 2) Maintaining the property exterior and grounds came in a definite second for the majority. 3) Offering in-unit upgrades/ remodels was not far behind in third.

Cash is King Rent.com asked property managers to rank resident retention tactics from most to least important and it’s no secret that money talks. The top three most important tactics are:

Survey Methodology The survey was conducted among Rent.com’s property customers representing approximately 15,000 rental communities and 1 million rental units.

Renters Are Younger and Richer According to 75% of property managers, prospects applying for apartments are younger or the same age as compared to a year ago. At the same time, the average income of prospects is generally either higher (42%) or the same compared to a year ago. The majority of property managers seeing demographic shifts in family status among their prospect base (30%) reported that more singles are renting their own places compared to a year ago. These are hopeful signs that the downward trend in unemployment, albeit slow, is driving more financial freedom.

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ON-SITE Market Overview...continued from page 9 during the quarter, down from 23 and 33 during 1Q13 and 4Q12, respectively. Sales proceeds totaled about $425mm, down from approximately $800mm during the first quarter. Prices equated to a $151,972/unit average, down from $174,677 in the prior quarter. Aggressive competition for Downtown and Bellevue trophies held cap rates on these assets in the low– to mid-4% range. Class-B/B– suburban assets, by contrast, exchanged hands at considerably higher yields in the 5.75% to 6.25% area. In view of the higher yields observed in recent garden trades, RCR elected to raise the generic Seattle cap rate 15 basis points to 4.75%. Using this going-in rate; a 5.61% exit level; and

our model derived occupancy and rent forecasts, we estimate a 7.1% expected 5-year annual rate of return, ranked 16th among the RED 46.

Trade & Return Summary $5mm+ Sales 15 Approx. Proceeds $424mm Avg. Cap Rate (FNM) 4.7% Avg. Price/Unit $151,972 Expected Total Return 7.1% RED 46 ETR Rank 16th Risk-adjusted Index 2.85 RED RAI Rank 29th

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On-Site Northwest • October 2013

A Momen

Congratulations to the 201 COMMUNITY MANAGER OF THE YEAR (1-150 UNITS )

COMMUNITY MANAGER OF THE YEAR (301+ UNITS)

LEASING CONSULTANT OF THE YEAR (1-300 UNITS) - CONT’D.

Amber Dunlop, Illumina Lake Union - Epic Charity Chrisman, CAM, The Artiste - Weidner Chelsie Mocoroa-Gobel, Latitude Madrona Ridge Christopher Schwab, Cosmopolitan - Pinnacle Dalia Valencia, Arterra - Holland David Bierer, Fern Ridge/Carriage Pl - Riverstone Emily Foster, Bentley House/Borgata - Thrive Emily Svensson, 128 on State - Prometheus Genevieve Mentele, The Corydon/The 101 - Pillar Jessica Fern, Rose Crest/Highland Gardens - FPI Julia Castanier, Guinevere - Epic Kamly Jubran, Ladera Heatherwood - SUHRCO Kathryn Coleman, Axis - Prometheus Lauren Harris, Villa Bonita - SUHRCO Liz Fuller, Aviator - Pinnacle Monica Stillwell, Arabella - Epic Myrriah Train, Meadow Wood/Oceans Pl - Indigo Nikki Helmer, The Queen Anne Collection Greystar Shea Tinkler, Maple Glen - Fairfield Sherilyn Butler, The Outlook - Riverstone Shubkarman Randhawa, Limestone Court Prometheus Sumita Gitre, Karbon - Pinnacle

Colleen Hollins, Camelot - Epic Delane Sidoti, Piedmont - Riverstone Dezeri Jackson, Cambridge Court - ConAm Jolene Brinkly, On The Green, Edgewood Park Madrona Ridge Judy Newman, Discovery Heights - HNN Kathleen Beeby, The Bravern - Riverstone Katie Neely, Keeler’s Corner - Prometheus Kimberly Dvorcek, Madrona Pointe - Pinnacle Lisa Michael, Meridian Pointe - Indigo Neely Stratton, CAM, Campo Basso - Epic Nicole Hamilton, The Onyx - FPI Sara Tackett, The Lodge at Peasley Canyon Riverstone Shannon Mitchell, Overlook at Magnolia - Weidner Stephanie Gaswint, Taluswood - Holland Suzy Lawson, CAM, Casablanca - Epic Teneile McLean, Excalibur/Sir Gallahad - Epic Tori Larson, Summerwalk at Klahanie - Holland

Hyan Ho, Emerson - Prometheus Kim Storment, The Corydon/The Nolo - Pillar Lani Dijulio, The Olivian - UDR Lauren Reel, The Corydon/The Lyric - Pillar

ASSISTANT COMMUNITY MGR. OF THE YEAR (1-300 UNITS)

Amanda Harris, Lake Park - Weidner Angela Hayes, Balfour Place - Riverstone Ashley Hagen, Alley 24 - Riverstone COMMUNITY MANAGER OF THE YEAR David Trybus, AMLI 535 - AMLI (151-300 UNITS) Diego Kaapama, Surrey Park - Prometheus Elise Vanpouke, The Lake - Prometheus Andrew Kiepprien, Evans Creek at Woodbridge Jessica Portch, Chelsea at Juanita Village - Thrive Riverstone Jill Sparks, CAM, The Lyric - Pillar Anela Kadric, Pacific Park - Epic John Bennett, Avignon Townhomes - Gables April Owens, Balfour Place - Riverstone Joyce Kim, Villages at South Station Ashly Radke, International House/Alaska House Madrona Ridge Pinnacle Katie Kucinski, Gilman Square - Madrona Ridge Brian Babcock, Skyline Park - Riverstone Katie Long, Heatherwood - HNN Candice Johnson, Dexter Lake Union - Prometheus Lindsay Arey, Avia - Riverstone Cindy Anthony, Pacific Walk/Southern Pines Mimi Lam, Sir Gallahad - Epic Pinnacle Mitch Sontra, Union at South Lake Union - Holland Elisha Young, Alley 24 - Riverstone Tonya Oaksford, Maple Park - SUHRCO Heather Lagat, Neely Station - Pinnacle Jenay Byrd, Avignon Townhomes - Gables ASSISTANT COMMUNITY MGR. OF THE YEAR Jennifer Higgenbotham, Brookside Village (301+ UNITS) Riverstone Kirsten Pitt, Bryson Square - ConAm Annalisa Johnson, Bridges at Northcreek - Thrive Lorraine Laffoon, The Berkshire - Greystar Brenna Burbank, Bay Court at Harbour Pointe Megan Vallor, The Nolo - Pillar Greystar Melanie White, CAM, Allegro - Weidner Caitlin White, Resort at Forbes Creek - Riverstone Rhonda Everson, Heights at Bear Creek Darkua Tagoe, Station at Othello Park - Pinnacle Riverstone Edita Alumbaugh, Ashton Bellevue/Ten20 - UDR Ronald Burkhardt, AMLI 535 - AMLI Eiren Alvarado, Piedmont - Riverstone Sam Mullen, Villagio on Yarrow Bay - Prometheus Jennifer Estep, Mosaic Hills - Riverstone Sara Hart, Villages at South Station Sarah Sandifer, Shorewood Heights - Pinnacle Madrona Ridge Stephanie Granados, Camelot - Epic Shannon Hammond, Rollin Street Flats - Riverstone Stacy Pegram, The Lyric - Pillar LEASING CONSULTANT OF THE YEAR Terra Walsh, Cottage Bay - Pinnacle (1-300 UNITS) Victoria Osborn, Totem Lake - FPI Charlene Cameron, Portsmith - Weidner Crystal Lash, Ridgedale - Riverstone Emily Jordet, Summit at Madison Park - Pinnacle

LEASING CONSULTANT OF THE YEAR (301+ UNITS) Auti Zarrin, Bridges at Northcreek - Thrive Brandon Storment, Via6 - Riverstone Jennifer Erickson, The Carriages - Berkshire Megan Rogers, Camelot - Epic Natasha Kulik, Lakeside - Weidner Sammie Pang, Metro 112 - Simpson Shera Byron, Fulton’s Crossing - Greystar

ROOKIE OF THE YEAR—OFFICE

Amanda Jenkins, Rollin Street Flats - Riverstone Benjamin Mriglot, Tower 801 - Pinnacle Damyn Allen, Via 6 - Riverstone Eduardo Porath, Avignon Townhomes - Gables Greg Shelton, Central Park East - Riverstone James Kim, Prometheus Jeremy Lainer, Salix Juanita Village Madrona Ridge Johnna Belarde, Circa Green Lake - Pinnacle Kristin Lipp, Addison on Fourth - Pinnacle Luiko Jantzen, Sutter’s Square - Pinnacle Mae Gomez, Skyline Park - Riverstone Mary Naylor, Sienna Park - Pinnacle Matthew Bryjak, The Ridge & The Shores - Weidne Matthew Rankin, Pacific Walk - Pinnacle Miranda Dymond, Bailey Farm - Riverstone Rachel Dudley, Balfour Place - Riverstone Sarah Schivo, Stream Uptown - Greystar

MAINTENANCE SUPERVISOR OF THE YEAR (1-150 UNITS )

Brandon Heath, Queen Anne Collection - Greysta Doug Frelin, Villagio - Epic James Clark, Liberty Ridge - ConAm James Delong, Fern Ridge/Carriage Pl - Riverston Jianhua Ni, Cascade Terrace - Pinnacle Jorge Nunez, Ellsworth House/Chalet - FPI Jose Garcia, Copperfield - Pinnacle Marlon Isaacs, Cosmopolitan - Pinnacle Nik Franchuk, Alaska House - Pinnacle Randy Cairnie, 128 on State - Prometheus Stephen Elder, Chelsea at Juanita Village - Thrive

MAINTENANCE SUPERVISOR OF THE YEAR (151-300 UNITS)

Al Wall, Park 212 - Epic Alan Emrick, Cottage Bay - Pinnacle Bill Holbrook, CAMT, The Lyric/The Nolo - Pillar Clayton Williams, CAMT, The Lyric/The Nolo - Pillar Drew Oaksford, Maple Park - SUHRCO Dustin Miller, Willina Ranch - Riverstone Eric St. John, Bremerton Gardens - Epic

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On-Site Northwest • October 2013

nt To Shine

14 emerald award nominees!

MAINTENANCE SUPERVISOR OF THE YEAR (151-300 UNITS) - CONT’D. Erik Budenos, Adagio - Weidner Francisco Dorantes, Woodside East - Riverstone James Vierra, The Seasons - Fairfield Jorge Jimenez-Lopez, Avignon Townhomes Gables Mel Stubblefield, Altamira - Greystar Paul Smith, Pacific Park - Epic Pavel Zaytsev, Tower 801 - Pinnacle Reuben Valesquez, Cliffside - Prometheus Sean Klones, Heights at Bear Creek - Riverstone Vadim Burlak, Heatherstone - Pinnacle

COMMUNITY OF THE YEAR (1-150 UNITS) Chateau Woods - Pinnacle Vista Ridge - Pinnacle Sammamish Ridge - SUHRCO 128 on State - Prometheus

COMMUNITY OF THE YEAR (151+ UNITS)

Aaron Forkell, Benson Downs - Simpson Bassim Barbour, The Cove - Weidner Casey Michel, Belara at Lakeland - Riverstone Dave Skerlong, Camelot - Epic Jeffrey Richardson, The Reserve - FPI Jeremy Monaghan, Resort at Forbes Creek Riverstone Kelson Sabas, Cambridge Court - ConAm Roy Sowerby, Madrona Pointe - Pinnacle Rudy Politte, The Ridgedale - Riverstone Thom Harbison, Campbell Run - Thrive Vladimir Galenko, Lakeside - Weidner Walt Bogucki, Bay Court at Harbour Pointe Greystar

Belara at Lakeland - Riverstone Brookside Village - Riverstone Island Park - Weidner Metro 112 - Simpson Shorewood Heights - Pinnacle The Cove - Weidner The Lyric - Pillar The Post - Pinnacle The Reserve at the Landing - Fairfield The Sanctuary at the Landing - Fairfield

MAINTENANCE TECHNICIAN OF THE YEAR (1-300 UNITS)

ne MAINTENANCE TECHNICIAN OF THE YEAR

Amy Williams - Pinnacle Billy Pettit - Pillar Sheri Druckman - Madrona Ridge Sumer Bradley - Prometheus

MAINTENANCE SUPERVISOR OF THE YEAR (301+ UNITS)

Adrian DeAsis, The Commencement - SUHRCO Jack Baker, Brisa - Madrona Ridge Jason Morgan, Avignon Townhomes - Gables Jose Villaga, Limestone Court - Prometheus Miles Welch, On the Park - Madrona Ridge Paul Brandt, Skyline Park - Riverstone Robert Hopkins, Cottage Bay - Pinnacle Siahei Lavor, Island Park - Weidner ar Vitaliy Dariychuk, Abbey Ridge - Pinnacle

PORTFOLIO MANAGER OF THE YEAR

COMMUNITY OF THE YEAR—AFFORDABLE Brandenwood Senior Apartments - Guardian Coronado Springs - Indigo Eagle’s Landing - Pinnacle Windham Historic - Riverstone

NEW DEVELOPMENT OF THE YEAR (2010 0R NEWER, 1-150 UNITS) Brookstone at Edgewater - Pinnacle Collage - Pinnacle Francis Village - FPI Hue - Holland Joseph Arnold Lofts - Thrive Parkview - Pinnacle

(301+ UNITS)

NEW DEVELOPMENT OF THE YEAR (2010 0R NEWER, 151+ UNITS)

Dan Iverson, Avana 522 - Greystar Jake Vahle, Bridges at Northcreek - Thrive Julio Ortiz, Piedmont - Riverstone Rick Schmidt, Bailey Farm - Riverstone Sergey Lavrenchuk, A’Cappella - Weidner Terry Spivey, Keeler’s Corner - Prometheus Trevor Baker, The Ridgedale - Riverstone

Aviara - BRE Bailey Farm - Riverstone Stack House - Indigo The Lyric - Pillar Union at South Lake Union - Holland Via 6 - Riverstone Waterscape at Juanita Village - Greystar

ROOKIE OF THE YEAR—MAINTENANCE

RENOVATED COMMUNITY OF THE YEAR (2011 OR SOONER, 1-300 UNITS)

Anand Srivastava, Keeler’s Corner - Prometheus Jesus Rosales, 128 on Stage - Prometheus Pavel Pavlov, Avignon Townhomes -Gables Robert Rudd, Tessera - Pinnacle Roderick Gray, The Lyric - Pillar Samuel Garcia, Balfour Place/206 Bell - Riverstone

RENOVATED COMMUNITY OF THE YEAR (2011 OR SOONER, 1-300 UNITS) - CONT’D. Parkwood at Mill Creek - BRE Station 9 - Thrive The Aviator - Pinnacle The Commodore - SUHRCO Waterford - Riverstone

RENOVATED COMMUNITY OF THE YEAR (2011 OR SOONER, 301+ UNITS) Avana 522 - Greystar Campbell Run - Thrive Waterford at the Lakes - Pinnacle

CURB APPEAL (1-150 UNITS) Axis - Prometheus Collage - Pinnacle Compass - Pinnacle Greensview - SUHRCO The 101 - Pillar

CURB APPEAL (151+ UNITS) BluWater - Riverstone Breckenridge - Weidner Dexter Lake Union - Prometheus Discovery Heights - HNN Evans Creek at Woodbridge - Riverstone Shorewood Heights - Pinnacle The Lyric - Pillar Willina Ranch - Riverstone

INDUSTRY PARTNER OF THE YEAR Alliance Flooring Apartment Guide HD Supply Mike Gladfelder - Trash Transit Moco, Inc.

LIFETIME ACHIEVEMENT To be announced at the gala.

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On-Site Northwest • October 2013

Washington Multi-Family Housing Association

Executive Director • Jim Wiard President • Jay Olson Vice President • Joe Manca Past President • Cassandra Haavisto Secretary • Gail Duke Treasurer • Brett Stevens Vice President of Suppliers Council • Barry Savage

he Washington Multi-Family Housing Association (WMFHA) recently held its annual Washington Apartment Outlook economic forecast meeting in Seattle, Washington. Joined by 700 owners, managers, brokers, lenders, suppliers and other stakeholders in the multifamily housing industry, attendees were treated to dynamic presentations by keynote speakers including Matthew Gardner from Gardner Economics and Mike Scott from Dupre+Scott Apartment Advisors. Both speakers gave much anticipated up to date economic news, occupancy statistics and rent trends along with their projections and perspectives for 2014. Seattle City Council President Sally Clark opened the meeting by praising WMFHA members and staff for work-

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ing with local and state policymakers to promote the contributions of the multifamily housing industry to create vibrant and healthy neighborhoods and communities. WMFHA presented their Legislator of the Year award to Senator Joe Fain (R-Auburn) for his leadership during the 2013 legislative session. Sen. Fain complimented WMFHA state lobbyist Kathryn Hedrick for her passion for the industry and her effective approach to working with legislators to education them on the need for safe, stable and affordable housing. Also presenting to the audience was Joseph Puckett, Director of Government Affairs for WMFHA. Joe brought the group up to speed on topics such as the Rental Registration and Inspection Ordinance (RRIO) and ex-offender legislation in employment, both recently passed in the city of Seattle, as well as the ramifications of the recent Landis case and the pending Encarnacion case. Under RRIO, all rental properties in the City of Seattle must be registered with the Department of Planning & Development by July 1, 2014. The registration fee has been proposed in the amount of $175 per property plus $2 per unit. This registration is good for five years. Ex-offender protection in hiring takes effect November 1, 2013 but does not apply if the employee “will or may have unsupervised access to children under 16 or vulnerable adults”. The Encarnacion matter will address how county clerks treat eviction filings and whether those eviction files can be or should be sealed or redacted if a judgment is not entered for the landlord. The Landis case from the court of appeals opens up the possibility of two warranties of habitability, one under the Residential Landlord Tenant Act, and a second implied warranty of habitability under civil law. This potentially destructive decision will need to be addressed through appropriate legislation in the upcoming session. Economist Matthew Gardner projected continued modest GDP growth but “known unknowns persist”. Those unknowns included a government shutdown due to Washington D.C.’s inability to pass a budget, the upcoming debt ceiling limit issue, and Federal Reserve policies over the next six months. Nationally, the job market is improving but we are still short of a full recovery from the recent recession years. Inflation remains a non-issue. The unemployment rate has likely peaked with more people leaving the work force but job growth is uncertain. Income growth is improving, but with regional disparities. “Private businesses are holding up the economy, but how much longer can that prevail?” wondered Matthew. Locally, Seattle’s economy continues to expand at a high rate and looks in better shape than the rest of the state, but other areas are catching up. Tacoma has improved greatly in the past six months. Compared to other west coast MSA’s, Seattle is a shining star and leading all other metropolitan areas for growth. “We are attracting a lot of attention nationally”, said Mat-

Continued on page 17 On-Site Northwest • October 2013

WA Outlook ...continued from page 16 thew. Seattle is also a job growth leader nationally, trailing just Dallas, Houston and Denver in non-agricultural employment growth. Unemployment is well below the national average. Again, the private sector is driving our growth. The forecast for employment growth in 2014 looks even better. Regarding occupancy and rent growth, the apartment market is predicted to remain strong in 2014, with the national vacancy rate at low levels and rent growth favorable. A big supply push has slowed the growth rate of effective rents nationally but the U.S. vacancy rate shows equilibrium. Affordability is becoming an issue in some markets. Home ownership rates will begin to trend higher but demographics still favor apartment owners and developers. Locally, there is a potential for overbuilding in some markets. Mike Scott’s company Dupre+Scott Apartment Advisors conducts extensive market research for the apartment industry. Average rents continue to grow at a favorable pace, but there is a sizable difference between average rents for apartments built since 2000 and apartments built before 2000, by about a 60% margin. Apartment sales prices continue to climb as a result. New construction is still approaching record rates, with nearly 14,000 units forecasted to come to market in 2015. Puget Sound cap rates continue to drop, to near 5%. Capital expenses per unit continue to increase to nearly $800 per unit, and renovations are seen as a

viable way to increase value through rent growth. Unit sizes in new construction, as well as parking ratios, continue to decrease. Market vacancy rates are expected to remain stable from their current 4% through 2014, but increase to 5% by mid-2015 and climb to over 6% by mid-2016 due to all of the new units projected to be built in the area. Starting in 2015, concessions will increase and NOI will decrease before rising again in 2017 as rents begin to once again stabilize and increase. The message was loud and clear – Seattle and the Puget Sound region are a hotbed of construction activity and investment interest spurred by outstanding rent growth and solid demographic and employment factors. However, supply and demand forces will soon dampen the strong revenue growth of the past couple years. The area should remain very positive despite increased construction as long as a national economic expansion continues, jobs continue to grow and partisan politics do not disrupt momentum. WMFHA wishes to thank all of our guest speakers and sponsor partners for the Washington Apartment Outlook forecast event as well as those who attended and supported the afternoon’s activities. Without your support, we could not continue to develop programs to share valuable information, educate our members and contribute to the multifamily industry.

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Washington Apartment Association President • Rob Trickler

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Marijuana Haze Continues... How Landlords can Sober Up a Bit

ashington made the possession and recreational use of marijuana legal during the last election cycle. This affects landlords in a dramatic way; like any smoking, a tenant using or growing in your building can damage the property. Unlike tobacco however, marijuana possession and use remains a federal crime, subject to prosecution. The effect of drug forfeiture laws on rental property remain unclear at this time. Federal Government may not presently be in a big hurry to prosecute, but we also learned that this can change at a moments notice leaving landlords in a precarious position. Like tobacco, the use of marijuana can be regulated by your lease agreement. To bar the use of marijuana on your property, we would recommend insert a clause which gives you the right to terminate a lease or rental agreement for using or possessing marijuana on the premises. Unlike clauses which bar other activities, such as painting or leaving rubbish on the property, we recommend you spell out that the use of marijuana in the unit is a non-curable event; that the tenant cannot simply promise not to do it

again; therefore, these terms have been written with a 20 day notice to terminate in mind. 1. Tenant shall be required to abide by all federal drug laws, including, but not limited to those governing the use, possession, sale or manufacture of marijuana, regardless of state or local statutes. So long as marijuana remains a violation of Federal law, violation of said law shall be a material and non-curable violation of this lease, and shall provide basis to terminate this rental agreement/lease at the landlord’s option, subject to a 20 day notice of termination to the tenant. 2. If any tenant or household member engages in criminal activity which would have been reason to deny the tenant’s rental application at the time of initial application, said activity shall constitute a material and non-curable violation of this rental agreement/ lease, and shall provide a basis to terminate this rental agreement/lease at the landlord’s option, subject to a 20 day notice of termination to the tenant. Remember that a 20 day notice to terminate must be served at least 20 days before the end of the rental

period; therefore, if your tenant is on an ordinary monthly cycle, serving a 20 notice calendar days is not sufficient. It must provide 20 days not counting the day you serve it AND ALSO end on the last day of the rental period. BOTH conditions must be met. What is more, if you do not get personal service and have to mail a copy you must also ADD ONE DAY making it 21 days. Also consider updating your nosmoking policy to explicitly include marijuana; this would give you an added layer of protection. Please keep in mind that this advice is a first glance look at a new conflict in the law. I expect that the advice on best practices will evolve as cases work their way through our various court systems. We will do our best to keep you as informed as possible. Stay tuned.

Rob Trickler Attorney and Counselor at Law President Washington Apartment Association

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ON-SITE D&Z ...continued from page 5 clearer work orders from the service requests the office staff receives. Most office staff doesn’t understand maintenance diagnosis and find it hard to generate clear work orders from the information that’s given to them by the residents. So, many work orders end up being written up like “toilet is broken” or “garbage disposal not working”. For a maintenance tech this can be as easy as a plunger or a disposal hex tool, and take him less than 5 minutes to perform, or it could mean a new wax ring or new disposal which could take closer to 45 minutes and extra trips to the shop. Here is a simple process that can be put in place to help your office

staff ask the right questions during the service request process in order to generate a work order that will save your maintenance staff time and effort, and maybe even some work orders all together. It works like this; I print and laminate a chart of the 10 most requested work orders and accompanying questions to ask. I usually tape it to the desk of the leasing staff and manager if they will let me. In my experience, this simple process has lead to hundreds of hours of free time. I explain it this way; if it takes your maintenance tech 7.5 minutes to walk to his shop because he didn’t have what he needed on the first trip due to a poorly written work order that

equates to 15 minutes of lost time round trip. This doesn’t even take into account time wasted looking for parts in a disorganized shop (that’s a topic for another time). If this 15 minute generalization holds and that tech has to make 4 unexpected trips to the shop that’s 1hr/day, 5hr/ week, 20hrs/month. That is more than 2.5 days of lost time and effort per month due to poorly written work orders. The manager complains that things aren’t done and the maintenance staff is complaining that there’s not enough time. They are both right if we continue to generate poor work orders.

Dana Brown and Zach Howell have been working and training Managers and Maintenance staff in the property management industry for 20 + years. They are excited to give back and share the crazy stories that can only happen in our industry. We would love it if you would share your stories and “WHAT WERE YOU THINKING” moments with us as well as questions that you need answers to. Dana can be reached at: danabrown3321@gmail.com. Zach can be reached at: zach@aminstitute.net

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Shop Talk ...continued from page 10 fully refundable if I did not like the apartment once I saw it. As you can see from the example above, having no apartments to show did not hamper that leasing consultant’s ability to sell AND close the sale! In fact, it was quite the opposite: With no apartment to show, this leasing person became even more creative in selling her product, as she was forced to describe the apartment in order for her prospect to visualize what she was talking about. Sometimes a client will

get MORE detailed information in these situations, not less. Remember: You only get ONE chance to make a good first impression. Selling what you have to offer, even if you can’t show it will increase your leasing ratio. Rather than demonstrating a dirty apartment or asking prospective renters to come back, put your product knowledge to the test: Give a thorough presentation with whatever sales tools you have at your disposal, and then close the sale. Once

If you have a question or concern that you would like to see addressed next month, please ASK THE SECRET SHOPPER by making contact via e-mail or fax. Your questions, comments and suggestions are ALWAYS welcome!

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ON-SITE Fair Housing ...continued from page 2 This article brought to you by the Charles River, in order to resolve a a family seeking housing because of complaint filed by the FHCGB with a person’s race, color, religion, sex, Fair Housing Council; a nonprofit serving the state of Oregon and SW the City of Boston’s Fair Housing familial status (e.g., children or mariWashington. All rights reserved © Commission (BFHC). The complaint, tal status), national origin, handi2013. Write jbecker@FHCO.org to filed in April 2013, alleged that cap/disability, marital status, sexual reprint articles or inquire about ongoCharles River, through its property orientation, military/veteran status, ing content for your own publication. manager, posted advertisements for genetic information, or receipt of To learn more… available rental units on Craigslist. public assistance. As the media release above points Learn more about fair housing and / org which stated that the available or sign up for our free, periodic newsunits were “not deleaded.” out, it is illegal under the federal Fair letter at www.FHCO.org. Investigations by the Suffolk Housing Act (FHA)1 to deny housQs about this article? ‘Interested in University Law School’s Housing ing to otherwise qualified families Discrimination Clinic and the with children (or otherwise treat articles for your company or trade association? FHCGB revealed that Ms. Coffin them differently in any way) simply Contact Jo Becker at jbecker@FHCO. made discriminatory statements to because there are children in the org or 800/424-3247 Ext. 150 potential tenants with children under household, unless the housing proWant to schedule an in-office fair six, in violation of federal, state, and vider is exempt as a “designated senior community.” (For informamunicipal fair housing laws. In the settlement agreement, tion on familial status protections Charles River Realty agreed to pay and the housing for older persons $15,000 to the FHCGB, and further exception visit www.FHCO.org/ agreed to promise to comply with all families.htm). The Boston settlement is just one fair housing laws; to have all of its employees attend fair housing train- more example of case law that has ing; and to have all of the rental units reinforced the fact that housing prothat it owns tested for lead paint. viders may not discourage potential Furthermore, Charles River Realty residents with children simply agreed to submit all of its advertise- because the property has or may ments for available units to the have “hazards” such as steep stairFHCGB to review them for compli- ways and balconies, busy streets, the ance with fair housing laws prior to presence of dangerous equipment or making the advertisement available lead-based paint. It is up to the household to determine if a given to the public. The FHCGB works to eliminate property is appropriate for them; it is ARIZONA not up to METRO, a housing provider to APT. NEWS housing discrimination and to pro- VALLEY, mote open communities throughout determine this for them. For more the region. It serves five counties in on familial status protections visit eastern Massachusetts (Middlesex, www.FHCO.org/families.htm or Essex, Suffolk, Norfolk, and www.FHCO.org for other fair housPlymouth). Under federal and/or ing information. state fair housing laws, it is illegal to Feb,anApr, Jun,orAug, Oct, Dec discriminate against individual

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Multifamily Delinquency Rate Decline Implies Strong Market Sector demand could bolster property values

By: Megan Hopkins, from PropertyManager.com a Service of AppFolio

ultifamily mortgage delinquency rates dropped in the second quarter of 2013, according to a report from the Mortgage Bankers Association, further indication that the multifamily market is picking up alongside the recovery in housing. Commercial loans overall saw a decline as well. "The quarterly decline in the delinquency rate of loans held in commercial mortgage-backed securities was the largest on record, and delinquency rates for loans held by life companies and the GSEs remain low and fell lower during the quarter," said Jamie Woodwell, vice president of commercial real estate research at MBA. The analysis from the MBA studies commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, CMBS, life insurance companies, Fannie Mae and Freddie Mac. These groups hold more than 80% of commercial/multifamily mortgage debt outstanding when combined.

For multifamily loans held by Freddie Mac, the delinquency rate was 6.72 percentage points lower than the series high of 6.81% in the fourth quarter of 1992. The delinquency rate for multifamily loans held by Fannie Mae was 3.34 percentage points lower than below the series high of 3.62% in the fourth quarter of 1991.

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In the second quarter of this year, the 60-plus day delinquency rate for commercial and multifamily mortgages held in life company portfolios inched down 0.01 percentage points to 0.08%. The 60-plus day delinquency rate for multifamily loans held or insured by Freddie Mac dropped 0.07 percentage points to 0.09%. For multifamily loans held or insured by Fannie Mae, the 60-plus day delinquency rate dropped 0.11 percentage points to 0.28%. The 90-plus day delinquency rate for loans held by FDIC-insured banks

and thrifts dropped 0.26 percentage points to 2.16%, while the 30-plus day delinquency rate for loans held in CMBS dropped 0.74 percentage points to 7.81%. Based solely on the unpaid principal balance of loans at the end of the second quarter, delinquency rates for 60-plus day loans for Freddie Mac was 0.09%, while Fannie Mac loans saw a delinquency rate of 0.28%. Freddie Mac Chief Economist Frank Nothaft told HousingWire that the multifamily sector is continuing to strengthen significantly and should continue doing so going into 2014. ”There have been a lot of very positive developments in the multifamily apartment market,” Nothaft said. Delinquency rates dropping and rates rising are both important for the multifamily market because it implies the revenue flow is improving, he added. “As the cash flow improves for the owners and landlords of the apartment buildings, that helps to support their payments they need to cover their expenses,” Nothaft said. The economist added that economic fundamentals have been very positive for the multifamily apartment market as a result of rents increasing over the past couple of years. Nothaft added that multifamily values fell during the Great Recession parallel to a drop in singlecontinued on page 23

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ON-SITE Strong Market ...continued from page 22 family home values; however, the multifamily market started to improve sooner. Multifamily values are up a fair amount over the last three years, said Nothaft. They’re not at the peak levels that they were at in 2006, but they have come back and they’re about 8-10% below where they had been at their peak. “It’s much better improvement in valuation compared to single-family properties,” he added. Low vacancy rates coupled with a strengthening economy, which will support household formation for young potential renters, will keep the multifamily sector healthy moving into next year. "Demand will support cash flow and will maintain stability with property values nationwide," said Nothaft. “It’s important to have a good cash flow," he added. Fannie Mae Multifamily Economist Kim Betancourt said there has been ongoing demand in multifamily, both from the tenant side and the sales side of properties.

"There's been a big increase in demand for purchasing these multifamily properties," said Betancourt. Looking ahead to 2014, Betancourt said demand will remain strong, but it is unlikely that factors such as rising rates and increasing home prices will have a strong effect on demand. "It's not going to have the steep increase that it had in the past because now we're in a more moderate cycle," she said. Betancourt added that multifamily has its own demographic, so those who are unable to own a home are more likely to rent single-family homes rather than renting an apartment. "We anticipate it's going to continue to be a nice, steady improvement for the multifamily sector," said Betancourt, who expects the delinquency rate to continue falling as we approach 2014. "To me, there's no reason why that number shouldn't continue to decline."

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Valuing Property Via The Capitalization Rate Methodology By: Leonard Baronfrom PropertyManager.com a Service of AppFolio When one wants to value property, like an apartment building, to get a feel for what it is worth, there are two different commercially recognized valuation approaches that are used. The first one is the comparable market approach analysis (CMA), which is used both for single unit residences and multi-unit properties. The second valuation approach is called the Capitalization Rate Valuation, or “Cap Rate” and it is used primarily for income producing multi-unit and other commercial properties. The CMA valuation is about as clear-cut and straightforward as can be for estimating a property’s value. The theory is that two properties, in similar shape, in a similar area, in a similar timeframe, with similar rents, in a similar size, unit or square footage, should sell for about the same value on a per unit or per square foot basis. Voila, it’s that simple. Approach number two is the Cap Rate methodology which is a much

better valuation tool for income producing properties like an apartment building. The reason it is a much better tool is because it’s really a “cash on cash” return calculation without respect to whether or not the owner will carry a mortgage on the property. And your hope is that if your Cap Rate Calculation, based on conservative, reasonable and supportable estimates comes back really low, like 2.0%, 3.0%, or 4.0%, you’ll quickly figure out that the property is not a very fair deal and you’ll pass on the purchase. With the “comps” method you may not notice it’s a bad deal because you are just looking at what another – possibly very unsophisticated investor – was willing to pay on the last deal, and it might be a very low return investment. So keep in mind, a property with 2.0% to 4.0% Cap Rate (or cash on cash investment returns) is not a very good deal – as I detail in this past article Property Investing – Go For The Cash Flow, Not Location, Location, Location. So avoid those low Cap Rate deals, even if they comp well. Let’s talk about how the Cap Rate

works. The Cap rate, instead of primarily comparing the physical assets of a property, compares the cash flows the property can generate. The basic calculation is: Net Operating Income (NOI) / Price or Value). So if the NOI is $50,000 and the asking price is $1,000,000, that’s a 5.0% Capitalization Rate. Note: The NOI is the rental income, less all expenses, except for the mortgage. If in a general vicinity, 12 properties sold recently at 5.0% Cap Rates, you, or an appraiser, would suspect that the next property for sale would also gravitate around a 5.0% Cap Rate. So if a 20 unit apartment building had NOI of $100,000, it would be valued, based on the Cap Rate approach, at about $100,000 divided by 5.0% (market Cap Rate) for a $2,000,000 valuation, or $100,000 per unit in this case. Therefore, if all those recent sales did close escrow at about a 5.0% Cap Rate and the next seller was asking for a 4.0% Cap Rate (Note: the lower the Cap Rate the higher the valuation), you’d want to bargain on price

to try and buy the property at a higher Cap Rate – and really the highest Cap Rate you could negotiate! That will give you the most cash flow per your investment dollar. A final note is that Cap Rates go up and down based on investor enthusiasm and demand, and the fancy prize properties usually have the lowest Cap Rates – and hence low cash on cash returns. So watch out for those dogs and you might want to consider non-real-estate investment options if the Cap Rates are too low. Always go for the cash flow! Good luck! Leonard Baron is America’s Real Estate Professor – his unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate buyers how to make smart and safe purchase decisions. He is a San Diego State University Lecturer, blogs at Zillow.com, and loves kicking the tires of a good piece of dirt! More at ProfessorBaron.com.

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You have paid for these services in your utility fees use them! On-Site Northwest • October 2013

PINPOINTING SAVINGS IS RE-ENERGIZING

Now is the time to map out your retrofit plans for the New Year and start saving time, energy and money! Check out Puget Sound Energy’s Direct Install Program that takes the worry out of managing the cost and installation – it’s FREE! For qualified customers, the program can retrofit your building’s units with energy and water saving showerheads, water heater pipe wrap, energy efficient lighting and other energy upgrades. To learn how you can get started: 1. Call a Program Representative at 1-866-997-9767 or e-mail at MultifamilyRetrofit@pse.com to schedule an appointment. 2. A free energy audit will be scheduled to qualify and establish pre-existing conditions. PSE will make recommendations on energy efficiency upgrades and see if your building qualifies for the Direct Install program. 3. The audit will also identify other ‘no cost’ and ‘low cost’ retrofit incentives your properties may qualify to receive through PSE’s Multifamily Retrofit Program. Schedule your appointment now to receive a PSE Direct Install Sample Kit

PSE is offering Direct Install Sample Kits that include ENERGY STAR® qualified CFL and LED light bulbs, a WaterSense® showerhead, and a section of pipewrap that will aid in your review process.

Incentives apply to existing multifamily properties with five or more attached units located in PSE service area and dependent on installed equipment efficiency and energy type. PSE’s programs are tariffed services, and are subject to change or termination without prior notice. Always refer to our website for the latest offerings.

PSE.COM/MULTIFAMILYRETROFIT On-Site Northwest • October 2013

ON-SITE

Surging Demand for Apartments

By Diana Olick PropertyManager.com a Service of AppFolio Despite recovery in the singlefamily housing market, demand for apartments continues to surge. Just 4 percent of U.S. apartments nationwide were vacant in the second quarter of this year, according to a new report from Reis. That pushed rents up 3 percent from a year ago. "The simple fact that vacancy continues to compress despite such low vacancy rates speaks volumes about the ongoing demand for apartments," said Ryan Severino, senior economist at Reis. "The national vacancy rate now stands 380 basis points below the cyclical peak of 8 percent obse rved right after the recession concluded in late 2009." As a result, construction is surging ahead, with 34,834 units completed during the quarter, the highest level

in four years and up from 21,237 a year ago. This large surge in new apartment product will meet head on with strong demand, and is therefore unlikely to cause any easing in rents. Rents are still rising, but not as fast as might be expected given the supply constraints. The culprit: weak income growth. "Landlords would like to raise rents faster, but most tenants simply can't afford to pay more right now," said Severino. While single-family home prices are recovering, and sales are picking up, younger Americans are still cashstrapped and some lack the credit scores to qualify for a home loan. That has left more of them renting. Household formation is increasing, but not nearly as quickly as some had predicted. On a local level, New Haven, Conn., and Syracuse, N.Y., had the lowest vacancy rates at 2 and 2.1 per-

cent, respectively. Both markets are home to major universities. The lowest vacancy rates are concentrated in East and West coast markets, accord-

ing to Reis, where home prices are the highest and new construction is constrained.

Advertise in On-Sight Circulated to over 20,000 Apartment owners, On-site, and aintenance personnel monthly. Call 503-221-1260 for more information.

On-Site Northwest â&#x20AC;˘ October 2013

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